The Reserve Bank has defended its inflation target as a way of managing the economy.
In a speech to the Otago Chamber of Commerce, Reserve Bank Governor Graeme Wheeler said monetary policy is facing challenging times, but he has rejected criticism of the Bank's approach.
Mr Wheeler said small economies like New Zealand are often influenced by overseas economies, and as a result expectations of what monetary policy can achieve run ahead of reality.
"Central banks must make finely balanced judgements when setting monetary policy, based on evidence, research, scenario analysis, and continual review of their policy record and international experience," he said.
Mr Wheeler said the Reserve Bank is sticking with its current interest rate track, which could see an expected further cut to the Official Cash Rate (OCR) in the coming months.
The OCR is already at a record low of 2.00% after a cut this month.
A link to the speech can be found here: http://www.rbnz.govt.nz/research-and-publications/speeches/2016/speech2016-08-23
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